Education in India has long been seen as the key to social mobility and financial independence. However, the cost of higher education has surged in recent years. As a result, many families find it difficult to afford quality education without external financial assistance. This is where an education loan comes into play.
In this comprehensive guide, you’ll learn everything you need to know about student loans in India. From understanding the different types of loans to comparing student loan interest rates and learning how to apply for student loan, we’ve got you covered.
1. What Is an Education Loan?
To begin with, an education loan is a financial product specifically designed to help students fund their studies. It covers a broad range of expenses such as tuition fees, hostel costs, travel, books, laptops, and other educational materials. Additionally, most lenders offer a moratorium period, which allows students to start repayment after completing their course.
2. Key Benefits of Student Loans
Taking an education loan isn’t just about funding your education. In fact, it offers several long-term advantages:
- Enables Higher Education: Students from low and middle-income families can access quality education, both in India and abroad.
- Minimal Upfront Financial Burden: Since repayment begins after the moratorium period, families aren’t pressured immediately.
- Flexible Repayment Terms: Repayment tenure usually ranges from 5 to 15 years.
- Tax Savings: Interest paid is tax-deductible under Section 80E.
- Builds Credit History: Timely repayment of student loans helps in establishing a strong credit score.
Furthermore, many government schemes are available to subsidize the cost, especially for economically weaker sections.
3. Different Types of Education Loans in India
When considering your loan options, it’s important to understand the types of education loans available. Broadly, these can be categorized as follows:
1.Based on Study Location:
- Domestic Education Loan: For studies within India.
- International Education Loan: For higher education in foreign countries.
2.Based on Collateral Requirement:
- Secured Loan: Requires assets like property, FDs, or insurance as collateral.
- Unsecured Loan: No collateral required, but usually comes with higher interest rates.
3.Based on Course Type:
- Undergraduate or Bachelor’s programs
- Postgraduate or Master’s programs
- Professional courses (e.g., CA, MBA, MBBS)
- Vocational or skill-based programs
Thus, you have plenty of options depending on your needs and financial background.
4. Courses and Institutions Covered
Education loans typically cover a wide range of academic programs. These include:
- Engineering, Medical, and Management courses
- Arts, Commerce, and Science degrees
- Professional certifications such as CFA, CPA, or CA
- Skill development and short-term vocational programs
- International degrees (MS, MBA, MBBS, etc.)
Institutions Covered:
- AICTE/UGC/NAAC-approved colleges and universities in India
- Reputed international universities ranked globally
- Premier Indian institutions like IITs, IIMs, AIIMS, NITs, and IISc
In other words, if your course and institution are recognized, you’ll likely be eligible for a loan.
5. Eligibility Criteria for Student Loans
Before you apply for student loan, you must meet some basic eligibility requirements. These are:
- The applicant must be an Indian citizen.
- Admission must be confirmed in a recognized institution.
- A co-applicant (usually a parent or guardian) is mandatory for loans above ₹4 lakh.
- The student should have a good academic background.
- For international loans, standardized test scores (GRE, GMAT, IELTS) may be required.
Importantly, your chosen course must have good career prospects to justify loan approval.
6. Required Documentation
Getting your paperwork right can significantly speed up the loan approval process. Here’s a checklist:
Students:
- Admission letter from the institution
- Academic mark sheets (10th, 12th, degree certificates)
- Proof of identity (Aadhaar, PAN)
- Address proof (Utility bill, Passport, etc.)
Co-applicants:
- Income proof (Salary slips or ITR)
- ID and address proof
- Employment or business certificate
Secured Loans:
- Collateral documents (property papers, FD receipts)
- Valuation report (if requested by the lender)
Having all documents ready ensures faster processing and improves your chances of approval.
7. How to Apply for Student Loan in India
Applying for a student loan today is far easier than it was a decade ago. You can follow this step-by-step process:
- Shortlist Lenders: Research banks and NBFCs online.
- Compare Offers: Evaluate student loan interest rates, moratorium periods, and other charges.
- Check Eligibility: Visit the bank’s site or use Vidya Lakshmi Portal.
- Fill Application Form: Either online or at the nearest branch.
- Submit Documents: Upload scanned copies or submit them physically.
- Get Sanction Letter: Upon approval, you’ll receive a sanction letter.
- Disbursement: The amount is transferred to your institution or your account.
Notably, government platforms like the Vidya Lakshmi Portal allow you to apply to multiple banks simultaneously.
8. Student Loan Interest Rates in India (2025)
Student loan interest rates can vary significantly between banks and NBFCs. As of 2025, here’s an overview:
| Bank/NBFC | Interest Rate (p.a.) | Processing Fee |
|---|---|---|
| SBI | 8.55% – 10.15% | Nil |
| HDFC Credila | 10.25% – 12.75% | 1.5% |
| ICICI Bank | 10.25% – 11.75% | ₹1,000–₹2,000 |
| Bank of Baroda | 9.15% – 11.15% | Nil (≤₹7.5L) |
| Avanse | 11% – 13.5% | 1–2% |
Additionally, many lenders offer concessions for female students and those from marginalized communities.
9. Secured vs Unsecured Loans: Which One Should You Choose?
Choosing between a secured and unsecured loan depends on multiple factors such as the amount needed, interest rates, and your financial background.
| Feature | Secured Loan | Unsecured Loan |
|---|---|---|
| Collateral | Required | Not required |
| Interest Rates | Lower (8%–10%) | Higher (10%–14%) |
| Loan Amount | Up to ₹1.5 crore | Up to ₹40 lakh |
| Processing Time | Slower | Faster |
| Approval Criteria | Based on asset value | Based on creditworthiness |
Therefore, if you have collateral, going for a secured loan could be more economical.
10. Repayment Terms and Conditions
Education loans come with flexible repayment conditions. Here’s what you need to know:
- Moratorium Period: Duration of the course + 6 to 12 months.
- EMI Start Date: After moratorium ends.
- Tenure: 5 to 15 years, depending on the lender.
- Prepayment Option: Usually allowed without any penalties.
Hence, borrowers can choose a repayment plan that suits their future income.
11. Government Schemes for Student Loans
Several government schemes are designed to make education loans more accessible:
Vidya Lakshmi Portal
This is a unified platform for students to apply for student loan from multiple banks with a single form. It simplifies the entire application process.
CSIS Scheme (Central Sector Interest Subsidy)
- Offers interest subsidy during the moratorium period.
- Applicable for students from families earning ≤ ₹4.5 lakh per year.
Dr. Ambedkar Scheme
This scheme supports SC/ST students pursuing higher education abroad by subsidizing interest and offering flexible repayment.
Thus, if you belong to an eligible category, don’t miss out on these schemes.
12. Tax Benefits on Education Loans
One of the lesser-known benefits of education loans is the tax deduction available under Section 80E of the Income Tax Act.
- Deduction on Interest Paid: No cap on the maximum deduction.
- Tenure: Available for up to 8 years.
- Eligibility: Only the borrower (student or parent) can claim the benefit.
As a result, your overall education cost can be significantly reduced.
13. Leading Banks and NBFCs Offering Student Loans
Here’s a quick look at top lenders:
| Lender | Max Loan (Domestic/Abroad) | Notable Features |
|---|---|---|
| SBI | ₹10L / ₹1.5Cr | Lower interest, no processing fee |
| HDFC Credila | ₹25L / ₹1Cr+ | Tailor-made plans, fast processing |
| ICICI Bank | ₹20L / ₹1Cr | Flexible repayment options |
| Axis Bank | ₹40L / ₹75L | Unsecured loans for top institutes |
| Avanse | ₹10L / ₹75L | Covers living and travel expenses |
So, depending on your loan amount and institution, choose wisely.
14. Smart Tips for Loan Approval
Before you submit your application, keep the following in mind:
- Maintain a strong academic record.
- Choose well-ranked or government-approved institutions.
- Submit complete and accurate documents.
- Opt for a co-applicant with a stable income.
- Consider secured loans for better terms.
These tips not only improve approval chances but may also get you better terms.
15. Frequently Asked Questions (FAQs)
16. Final Thoughts
An education loan is not just a financial product—it’s an investment in your future. Whether you’re aiming for IIT, IIM, or Harvard, a student loan can remove the financial barriers that stand in your way. With numerous options, competitive student loan interest rates, and simplified processes to apply for student loan, pursuing your dream education is more achievable than ever.
Take the time to compare lenders, understand your financial responsibilities, and apply early. With the right planning and timely repayments, your education loan can pave the way to a bright and financially secure future.
